Tragedy of the Commons: Once Upon a … Water

Not a day goes by without coming across an article or blog on water scarcity. We have reached a tipping point where we need to monetize and assign a dollar value to a natural resource like water — without which we cannot survive. We live on the water planet: 75 percent of Earth’s surface is covered by water. Yet fresh water is scarce. Aristotle and other philosophers were right on the mark when they said, “What is common to the greatest number has the least care bestowed upon it!”

Laws of physics dictate that water cannot simply vanish from the earth. But the water scarcity problem is global and serious. Without introducing the impact of climate change on the water resource, the water scarcity problem influenced by the increasing population and fears of food security is dominating the policy- and decision-maker’s agenda. Even after investing some $400 billion in water supply over the past century, the United States, with so much innovation and technology at its feet, faces a shortage that has no easy remedy. The Golden state and Lone Star states are forced to acknowledge this issue in the face of the existing drought.

The problem persists because water is so undervalued. According to Fortune, New York City charges residential consumers $3.37 per cubic meter; Chicago is $1.46; and Miami is $1.15. But the residential impact on water scarcity is minimalistic with only 8 percent usage, meaning water scarcity cannot be linked to the usage in kitchen or bathroom. According to the U.N., 70 percent of the global water supply is consumed in agricultural production. When farmers have to buy water on the spot market, it is sold in acre-feet and a lot cheaper than the municipal water.

The second-largest consumer is industry, with a total of 22 percent. For business, water scarcity is a far more pressing problem than climate change or managing GHG emissions. The marginal cost of water is rising. Companies are acknowledging that it can affect not only their business strategy and insurance costs, but also their rating in the area of corporate social responsibility (CSR).

Ford’s water stewardship initiatives, for example, has invested millions of dollars in wastewater treatment and rainwater harvesting and purification projects around assembly plants in water-scarce regions of India, South Africa and South China. SABMiller understand that their profitability depends on the responsible use of water. They have invested millions of dollars to conserve and improve its own water supplies, including $6 million to upgrade pipes and other equipment at one of its plants in Tanzania affected by deteriorating water quality. Roughly 90 percent of the water used, which ranges from 61 to 180 liters per liter of beer goes for crop cultivation. In 2010, the company used 731 hectaliters of water for production.

One could argue that the answer to water scarcity is to price water. The idea of treating water as a commodity like oil or gold might seem disturbing on its face. Access to clear water ought to be a human right and the U.N. supported this by passing a resolution in 2010. Environmental economists suggest applying the free market force — Adam Smith’s “The Invisible Hand” speaks to this issue — allocate a certain amount of water for everyone for free (or almost no cost) and have a free market for the rest.

China, with 19 percent of the world population and only 7 percent access to freshwater, is taking a leap into the pricing tool. The government announced earlier this year that it would roll out a wide reaching program in which the affluent urban consumers would pay higher for access to water. San Diego recently implemented a tiered pricing system as well. Australia has established a cap-and-trade system similar to the one used for carbon tax to curb GHG emissions, which is pushing industry leaders to conserve water and invest in water-saving projects.

Craig Childs, in his book “The Secret Knowledge of Water,” writes: “There are two easy ways to die in desert: thirst and drowning.” If one is thirsty in the middle of the desert, the knowledge of economics and free market does not help. Finding water might be possible; purchasing it is just a mirage!

Time will tell whether water pricing will make a dent in the global water crisis? Companies like Coca-Cola, SAB Miller, Merck and Nestle are joining hands with local communities, nonprofit groups and local governments and investing in water conservation efforts even with the market price of water near zero. It is critical for them from the point of view of supply dependability and reputation.

In my view, we should focus our efforts on the agriculture industry. Use of innovation and technology like drip irrigation, education in water saving techniques, and better pricing structure can provide rational incentives. Paul Hawken in his book “Natural Capitalism” cites the example of California’s San Joaquin Valley: The Broadview Water District set a 1989 water intensity target at 10 percent below its 1986-1988 average for crops and enforced a stiff surcharge on excess water use. As a result, water use per acre fell by 17 percent and total drainwater by 25 percent. A 1990-1991 survey in Oregon showed that a consultation saved 10 to 25 percent of farmers’ water — or twice that amount in some cases — just through awareness and better management.

Whenever one is faced with two different paths, each with its certainties and unknowns. You could always take the path less travelled, but the cardinal rule in strategic planning is to take a path that allows you to shift to the other path if your initial decision should prove wrong. The solution to water scarcity is largely in the hands of governments, not companies, because it requires policies such as better regulations, access to water for agriculture, innovation and efficiency. Agriculture is responsible for about twice as much of total U.S. water withdrawals as all industry, buildings and mining combined. We have to have to apply systems thinking approach to this problem — everything is part of the puzzle. Increasing population, food security and water scarcity are all interrelated and interdependent.

As futurist, Peter Schwartz advises in his book “The Art of the Long View”: “We should choose the option that gives us the most options in the future.”

Meghna is the Director of Sustainability for University of Texas at Arlington where she has initiated and spearheaded many successful cross functional sustainability projects related to policy implementation, buildings and development, green procurement, transportation, employee engagement, waste management, GRI reporting, and carbon management. She is a TEDx UTA speaker, was featured as Women in CSR by TriplePundit, has done various radio shows on sustainability, and is an MBA Candidate in Sustainable Management at the Presidio Graduate School. She has a sunny and positive attitude about life and all of its adventures. She enjoys traveling, hiking, reading, and building relationships with friends and co-workers.

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What is wrong with giving water a proper price that represents its cost of production and scarcity. Without such a price it will continue to be abused like most other natural products. The incentivisation of a realistic price will encourage more efficient use and less wastage by the heavier users, particularly if they find they can’t pass the cost on. It will also encourage a more universal recycling and use of grey water, where appropriate, and a move away from the one use throw it away approach currently used. And for those of you who will complain about the social hardship of the realistic pricing domestic water. We currently have a pricing structure in favour of the industrial users well reverse the pricing structure. Such pricing will also reduce the domestic abuse of water even though this is not on the same scale as industry

Mortimer

In the early 1900’s farmers were given a generous water allotment for Colorado River water. The law states that they are eligible to use all the water they say they need “for the foreseeable Future.” This has reached the point that a few years ago, there were rice farms in the Imperial Valley. Please tell me that this no longer true.

marcusbarber_futurist

The Water issue was tackled in this 2004 paper that showed (among other things) how to price water accurately; how differing social structures lead to differing approaches to water management; and that if you are going to propose a solution, use one that matches the specific conditions of that environment or expect failure. http://www.metafuture.org/Marcus%20Barbar%20-%20A%20drop%20in%20the%20ocean.pdf

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